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V1678-19 8 July 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Proportional exemption of capital gains applies only if the full amount is not reinvested

A taxpayer sold their primary residence for 300,000 euros and reinvested 250,000 euros into a new home. The Tax Agency has clarified that, since the total amount was not reinvested, only the proportional share of the capital gain corresponding to the amount actually invested will be exempt from taxation.

The question raised

Whether the exemption for reinvestment can be applied to the entirety of the capital gain obtained from the sale of one's primary residence, and specifically, what amount must be reinvested.

The DGT's ruling

For the capital gain to be exempt, the total amount obtained from the transfer must be reinvested, subtracting the outstanding principal of a loan if any exists. If the reinvestment amount is less than the total amount obtained, only the proportional part of the gain corresponding to the amount actually invested shall be excluded from taxation. Both the transferred and the acquired property must be primary residences, meeting the requirements of continuous residence or exceptional circumstances.

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